TMI Blog2015 (7) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... rore needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue with regard to claim of payment of ₹ 1 crore to the agreement holders is remitted back to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes. Disallowance of ₹ 50 lakhs withheld by the purchaser - the assessee claimed that his brother made a claim over the property, therefore, the purchaser withheld a sum of ₹ 50 lakhs on the basis of indemnity bond - Held that:- A reading of clauses 6, 7 and 8 of sale deed dated 26.4.2001 shows that the assessee has received the entire sale consideration of ₹ 3,50,00,000/- on or before the date of execution of the sale deed. Therefore, it is not known how the purchaser was able to withhold the money on the basis of an indemnity bond. The CIT(A) has simply allowed the claim of the assessee on the ground that the payment of ₹ 50 lakhs and investment thereof was properly evidenced. Whether the payment of ₹ 50 lakhs is over and above the sale consideration disclosed in the sale deed or it was a part of the sale consideration disclosed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed against the order of the Commissioner of Income-tax (Appeals)-VI, Chennai, dated 17.102007 and pertains to assessment year 2002-03. 2. Shri P. Radhakrishnan, the ld. Departmental Representative submitted that the assessee entered into an agreement for sale of 10,396 sq ft of land at Ranganathan Street, T. Nagar on 22.7.1998 with Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum. As per the agreement, the proposed purchaser of the property has to pay interest @ 24% per annum on the amount payable in case the entire sale consideration was not paid within 30 months from the date of the agreement. However, this agreement dated 22.7.1998 was cancelled by another agreement dated 31.7.2000. According to the ld. DR, the assessee claimed before the Assessing Officer that the property could not be developed as contemplated in terms of the agreement dated 22.7.1998, therefore, it was cancelled by another agreement dated 31.7.2000. Subsequently, the assessee entered into another agreement on 30.10.2000 with (i) Shri S. Yogarathnam, (ii) Shri S. Rajarathnam and (iii) Shri S. Selvarathnam, for sale of the very same property for ₹ 3,50,00,000/-. As per this agreement, a sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med before the Assessing Officer that the previous agreement holders obtained approval for construction of the building, planning permission etc, no such material is available on record to suggest that such planning permission was obtained by them. According to the ld. DR, merely because planning permission was obtained on the basis of the Power of Attorney given by the assessee, it cannot be said that there was a development of property. According to the ld. DR, it is the assessee's responsibility to handover the vacant physical possession of the property to the prospective purchaser, therefore, the expenditure if any, incurred prior to the ale cannot be considered as expenditure incurred in connection with transfer of property or improvement of the property u/s 48 of the Act. 3. The ld. DR further submitted that the agreement was cancelled since the purchaser could not pay the balance sale consideration within the time period. Therefore, the payment of ₹ 1 crore to the previous agreement holders is not for the purpose of cancelling the agreement. It is for the purpose of diverting the profit arising out of the transfer of the property. The ld. DR further submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has received the entire sale consideration on the date of sale deed. 5. The ld. DR further submitted that the assessee has also claimed an amount of ₹ 50,000/- towards brokerage. According to the ld. DR, the identity of the broker and genuineness of the payment were not proved before the Assessing Officer. In fact, according to the ld. DR, no details were filed before the Assessing Officer. The ld. DR submitted that in fact the property was sold to the existing tenant, therefore, the question of payment of any brokerage would not arise for consideration. 6. On the contrary, Dr. Anita Sumanth, ld. Counsel for the assessee submitted that admittedly, the assessee entered into an agreement for sale of property at 17, Ranganathan Street, T. Nagar, Chennai- 17, with Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum on 22.7.1998. Though the assessee received part of the sale consideration as advance, the sale could not be completed and in pursuance to the Power of Attorney given to the proposed purchaser, he made efforts to vacate the existing tenants and also incurred expenditure for obtaining planning permission from the local authorities. Since the agreement could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the same was paid to the assessee on 16.11.2002 which is corresponding to assessment year 2003-04. During the same year the assessee deposited the amount in the NABARD account. Therefore, according to the ld. Counsel, the assessee is entitled for deduction u/s 54F of the Act in respect of the amount withheld by the purchaser. 10. According to the ld. Counsel, the assessee has paid the amount of ₹ 2,50,000/- as brokerage for sale of the property. This was never disputed by the Assessing Officer. Therefore, the assessee thought it not to file any details with regard to the brokerage and payment thereof. 11. We have considered the rival submissions on either side and also perused the material available on record. The first issue arises for consideration is payment of ₹ 1 crore to the previous agreement holders. It is not in dispute that the assessee entered into an agreement for sale of the property with Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum on 22.7.1998 for sale of the property situated at Door No.17/2 Ranganathan Street, T. Nagar, Chennai. The assessee has filed the copies of the agreement for sale at page 30 of the paper book. In the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the AGREEMENT - HOLDERS towards eviction of tenants, preparation of plans, development and improvement expenses and costs of holding; and also relinquishment of all their rights and interests in and over the Schedule 'A' property, the VENDOR hereby agrees to pay a sum of ₹ 1,00,00,000/- 9Rupees One crore only) to the AGREEMENT - HOLDERS, in addition to refunding a sum of ₹ 42,00,000/- to them (Rupees Forty two lakhs only) paid as advance by them under the said Agreement of Sale in terms of the next clause. 12. In view of the above clause in the agreement, it has to be seen whether the purchaser has obtained any planning permission from the local authorities or the tenants are evicted. As rightly submitted by the ld. DR, no material is available on record either to indicate that an application for planning permission was filed before the local authorities or permission was granted by the local authorities. There is no evidence available on record to suggest that the tenants apart from the assessee was evicted from the premises. In fact, the assessee could have filed a suit for specific purpose to enforce the agreement dated 22.7.1998. But instead of fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The assessee claims that the money itself was received on 16.11.2002. However, the sale deed does not say that the money was withheld by the purchaser. 14. We have carefully gone through the Assessing Officer. From the order of assessment it appears that the property sold is a commercial property. Section 54 is applicable in respect of residential house. Since the Assessing Officer found that exemption u/s 54 cannot be claimed, the assessee appears to have claimed exemption u/s 54F. For the purpose of this appeal, the dispute is only in respect of the amount withheld by the purchaser to the extent of ₹ 50 lakhs. A reading of clauses 6, 7 and 8 of sale deed dated 26.4.2001 shows that the assessee has received the entire sale consideration of ₹ 3,50,00,000/- on or before the date of execution of the sale deed. Therefore, it is not known how the purchaser was able to withhold the money on the basis of an indemnity bond. The CIT(A) has simply allowed the claim of the assessee on the ground that the payment of ₹ 50 lakhs and investment thereof was properly evidenced. Whether the payment of ₹ 50 lakhs is over and above the sale consideration disclosed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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